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Fresh short selling in the banking sector increased by 11.4%, or
$12.8 billion, globally in March, taking the total short
interest after adjusting for decline in stock prices to $109.7
billion, S3 Partners said on Wednesday.
About 75% of total short selling is in U.S., Canadian and
European banking stocks.
The S&P 500 banks index is down 19% in March, heading for its
worst monthly performance since March 2020 as the turmoil among
U.S. regional lenders sparked fears of contagion.
Short selling in worldwide banking stocks returned a 17.2%
profit on an average short interest of $82.4 billion, according
to S3 Partners.
About 78% of every stock and 97% of every dollar shorted in the
banking sector was profitable this month, S3 Partners said.
However, since the last week, banking stocks have shown signs of
a revival, with regional U.S. lender First Citizens BancShares
scooping up the assets of failed peer Silicon Valley Bank on
Monday, a vote of confidence for the battered sector.
The S&P 500 banking index bounced back 6.5% from a more than
two-year low on Friday.
Excluding SVB Financial Group and Signature Bank NY Bank, sector
short sellers are down 4.5% since March 23, giving back $587
million of their March profits.
"If this upward price trend continues in the rest of the
regional banks, we should see short covering as short sellers
rush to realize some of their mark-to-market profits," S3
Managing Director Ihor Dusaniwsky said.
When there is a rush of demand from short sellers to exit
bearish bets due to a rise in a stock's price, it pushes prices
even higher, resulting in a short squeeze.
(Reporting by Medha Singh in Bengaluru; Editing by Pooja Desai)
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